# C we have mu f p f mu c p c so can increase utility

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C, we have MU F /P F > MU C /P C So can increase utility by spending 1\$ more on food and 1\$ less on clothing since it will give us dU=U F /P F -U C /P C >0 So at the optimum we must have: MU F /P F = MU F /P F or MRS = P F /P C

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Consumer Choice If MRS (=MU F /MU C ) < P F /P C we have MU F /P F < MU C /P C So can increase utility by decreasing food consumption and increasing clothing consumption until – MU F /P F = MU F /P F or MRS = P F /P C
Marginal Utility and Consumer Choice Total utility is maximized when the budget is allocated so that the marginal utility per dollar of expenditure is the same for each good. This is referred to as the equal marginal principle. In other words, at the optimum the consumer should get the same utility from a dollar spent on any good.

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Corner solution A corner solution exists if a consumer buys in extremes, and buys all of one category of good and none of another MRS is not necessarily equal to price ratio
A Corner Solution Ice Cream (cup/month) Frozen Yogurt (cups monthly) B A U 2 U 3 U 1 A corner solution exists at point B.

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A Corner Solution At point B, the MRS of ice cream for frozen yogurt is greater than the slope of the budget line Yogurt Frozen IceCream Yogurt IceCream P P MU MU MRS =
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